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Unit root tests of the current account balance: implications for international capital mobility

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  • Gundlach, Erich
  • Sinn, Stefan

Abstract

This paper assesses the extent of international capital mobility in a time series context. It explores the possibility that the current account balance of different OECD-countries contains a unit root. It is shown that if the ratio of the current account balance to GDP is found to be integrated of the order of one, the country is likely to be part of the world capital market. The results for the whole period 1950-1988 indicate that the current account balance of at least Germany, Japan, and the United States contains a unit root. Considering the subperiods before and after 1972 it is shown that international capital mobility increased after the breakdown of the Bretton Woods System.

Suggested Citation

  • Gundlach, Erich & Sinn, Stefan, 1991. "Unit root tests of the current account balance: implications for international capital mobility," Kiel Working Papers 495, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:495
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    References listed on IDEAS

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    6. Martin Feldstein, 1991. "Domestic Saving and International Capital Movements in the Long Run and the Short Run," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 331-353, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Lori Leachman, 1994. "Saving, investment, and capital mobility: A comment on Leachman—A reply," Open Economies Review, Springer, vol. 5(1), pages 19-21, March.
    2. J. Mcclure, 1994. "The Feldstein-Horioka puzzle: The IS-LM model with optimal policy," Open Economies Review, Springer, vol. 5(4), pages 371-382, October.

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    More about this item

    Keywords

    International capital mobility; current account adjustment; unit root tests;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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